Boeing plans to carry on with production of 787

Boeing plans to keep building its flagship jetliner while engineers try to solve battery problems that have grounded most of the 787 fleet.

It's not clear how long the investigation – or the fix – will take. But it won't be cheap for Boeing or for the airlines that had sought the prestige of flying the world's most sophisticated passenger plane, a marvel of aviation technology that right now can't even leave the tarmac, let alone cross continents and oceans.

Boeing's newest jet was grounded worldwide Thursday after one suffered a battery fire and another had to make an emergency landing because pilots smelled something burning. Airlines and regulators canceled all Dreamliner flights.

The groundings were a sign of how seriously regulators take any threat of an in-flight fire. National Transportation Safety Board photos of the battery container from a Jan. 7 fire on a
Japan Airlines plane showed a blue box with black smudges and blackened wiring and batteries inside.

LOT Polish Airlines suffered the highest-profile embarrassment of any of Boeing's customers late Wednesday, just as it was showing off new service between Warsaw and Chicago.

The plane's captain learned of the FAA grounding order while making the inaugural flight from Warsaw to Chicago. The airline canceled the return trip – and a ceremony at O'Hare Airport that was to include airline officials and Mayor Rahm Emanuel. Passengers who were eager to take the airline's first flight back to Warsaw had to look for a hotel room instead.

The airline said Thursday that it may seek compensation from Boeing for the grounding of its two 787s.

NO DELIVERIES

SINCE JAN. 3

Boeing builds five 787s per month. It hasn't delivered any since Jan. 3, before the plane started experiencing a spate of problems that included fuel and oil leaks, a cracked cockpit window and a computer glitch that erroneously indicated a brake problem.

Boeing spokeswoman Lori Gunter said no deliveries had been scheduled during that time. She declined to discuss planned deliveries.

Regardless of delivery schedules, it's cheaper for Boeing to build the planes and then go back and fix them than it is to shut down production.

All Nippon Airways said its 18th 787 is due at the end of this month, but it won't take delivery until 787 flights resume.

The FAA grounding was a stunning setback for Boeing. The plane has been in the works since 2003, a time when modern jetliners were built of aluminum and powered many of their internal systems with incoming air from outside the plane. Boeing engineers figured they could get better fuel efficiency by making the plane out of carbon composites, a sort of lightweight, high-tech plastic. And they used electricity rather than air because it saved space and weight.

The 787 was tested extensively before and after its first test flight in 2009. The FAA said its technical experts logged 200,000 hours testing and reviewing the plane's design before it was certified in August 2011.

Six test planes ran up some 4,645 flight hours. About a quarter of those hours were flown by FAA flight test crews, the agency said in 2011.

New 787s sell for more than $200 million at list prices. For that kind of money, airline customers get warranties and in some cases a promise from Boeing to cover costs if the plane is grounded.

Those agreements vary from customer to customer, so it wasn't known how much the grounding would cost Boeing. Analysts pointed out that there are few airplanes in the size range of the 787 that are available to be leased to replace 787s.

COST OF A FIX

Even analysts who are most critical of Boeing believe that the company will eventually resolve the problems and the 787 will deliver on its promise.

Still, Jefferies analyst Howard A. Rubel estimated that reworking the jet to fix electrical problems could cost anywhere from $250 million to $625 million. He emphasized Thursday in a note to investors that little is known about what it will take to fix the problem. He also noted that some of Boeing's suppliers may bear some of that cost.

Fitch Ratings said the grounding will hurt Boeing's profits and cash flow, “but the company has the financial strength to withstand negative developments in the program.”

Barclays analyst Carter Copeland predicted “relatively limited” impact on Boeing's finances or production. That might change if the groundings last for weeks or months, “but this isn't yet what we expect,” he wrote Thursday in a note.

Payments to airlines for lost revenue are possible but not likely to be big enough to hurt the company, he added.

The grounding will force airlines to swap in a different plane – often, a Boeing 767 or 777. Even though all of those planes are built to carry a large number of passengers on long-haul flights, their seating layouts are different, and last-minute plane switches are a headache for airlines and passengers. As long as they don't have to cancel a flight, though, airlines will still collect their money from the ticket.

For most airlines, the 787 is a minor part of their fleet. United has six of them and 151 other large planes that it uses for international flights. ANA's 17 787s are a bigger portion of its fleet of roughly 120 big planes.

As details emerged of two battery failures only 10 days apart, it became apparent that the FAA wouldn't be able to wait for completion of its safety review before taking action. An inspection of the All Nippon Airways 787 that made an emergency landing in western Japan found that electrolytes, a flammable battery fluid, had leaked from the plane's main lithium-ion battery. Investigators found burn marks around the damage. Japan's Kyodo News Agency quoted transport ministry investigator Hideyo Kosugi as saying the liquid leaked through the electrical room floor to the outside of the aircraft.

In the first battery incident on Jan. 7, it took firefighters 40 minutes to put out a blaze centered in an auxiliary power unit of a Japan Airlines 787. The plane was empty of passengers shortly after landing at Boston's Logan International Airport.

The two incidents resulted in the release of flammable electrolytes, heat damage and smoke, the FAA confirmed. The release of battery fluid is especially concerning, safety experts said. The fluid is extremely corrosive, which means it can quickly damage electrical wiring and components. The 787 relies far more than any other airliner in operation on electrical systems to function.

The electrolyte fluid also conducts electricity, so as it spreads it can cause short-circuits and ignite fires. And its corrosiveness raises concern about whether a leak might weaken a key support structure of the plane, even though the 787 is the first airliner to be made primarily from lightweight composite materials that are less susceptible to corrosion than aluminum, safety experts said.

“Any time you have leakage of battery fluid it's a very serious situation,” said Kevin Hiatt, president and CEO of the Flight Safety Foundation in Alexandria, Va., which promotes global airline safety.

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